Small-cap stocks have been under a significant degree of pressure in recent sessions, even though benchmark indexes have reached new record highs. This is even though the benchmark indices have reached new highs. The valuations of these stocks have reached exceptionally high levels as a result of the amazing run that investors in these stocks have experienced over the past year.
Investors are taking profits during these moments, even when the market is experiencing very modest corrections, according to analysts who have seen this phenomenon. Over this week, the Nifty Small Cap 100 index has experienced a decline of more than three percent, but the Nifty 50 index has experienced an increase of half a percent during the same period.
Small-cap stocks experienced a meteoric surge during the period in which large-cap stocks underperformed. This shows that momentum is changing towards large-cap equities, which underperformed during that era. Large-cap firms are currently being perceived by investors as having pricing that is more tempting because they are contrasted to their smaller competitors.
Additionally, in response to the growing concerns regarding the valuations of small-cap stocks, the Securities and Exchange Board of India (SEBI) has instituted stress tests that fund companies are required to carry out. These tests are intended to examine the capacity of the fund to withstand adverse conditions. The Securities and Exchange Board of India has reportedly demanded that the mutual fund institutions that manage small-cap funds with a high corpus produce information detailing their holdings in the whole free float of small-cap stocks. This request was made in response to the fact that the SEB has requested that these institutions provide this information.
It is anticipated that the discrepancy between large-cap stocks and small-cap stocks will continue to exist, as stated by Dr. V. K. Vijayakumar, who serves as the Chief Investment Strategist at Geojit Financial Services. This is because the valuation of the entire market continues to be exceedingly high, and the regulator has stated clearly about the froth that exists inside the segment. Both of these factors have contributed to this situation.
As a consequence of this, investors have the option to move from small-cap stocks to large-cap stocks that are reasonably priced, and even partially to fixed-income products, but this possibility is available right now. In light of the current status of the market, safety must be given precedence over return,” he continued their conversation.
As a consequence of the most recent decline, fifteen stocks have experienced drops that range from fifteen percent to thirty percent from their record highs from the previous year. During the past year, each of these equities has demonstrated multi-bagger returns, and even after the most recent adjustments have been made, they continue to demonstrate gains that vary between one hundred and three hundred percent. Regarding this particular matter, it is important to take it into mind.
For instance, SJVN has witnessed a decline of thirty percent, hitting a price of ₹119 per share, which is a significant decrease from its 52-week high of ₹170.50 before this decline. On the other hand, it has increased by a factor of 260% over the previous year. Similar to Angle One, which achieved a high of ₹3,896 per share a year ago, Angle One has also endured a loss of thirty percent for the same reason.
Even though the shares of NBCC (India), a construction business that is controlled by the state, have experienced a fall of 28%, they have still demonstrated a rise of 257%. Along the same lines, the stock of NLC India has witnessed a decline of 24 percent from its 52-week high before the current time.
While this is going on, the government is making preparations to sell a maximum of seven percent of NLC India at a minimum price of ₹212 per share. The auction would be held over two days, beginning on Thursday and continuing through Friday.
On Thursday, institutional investors will have the opportunity to take part in the ₹2,000 crore OFS, while normal investors will have the opportunity to participate on Monday. On Fridays, the market is closed because it is the day of the Maha Shivratri holiday, which is celebrated across India.
In addition, other stocks, such as Jyothy Labs, JBM Auto, Indian Overseas Bank, Cyient, Mangalore Refinery and Petrochemicals, Suzlon Energy, Global Health, UCO Bank, Central Bank of India, IRB Infrastructure Developers, and BLS International Services, are currently trading at a discount of between 15 and 23 percent from their peaks from the previous year. This discount is based on the fact that these stocks are currently trading at a discount.